Justice Department Blasts Purdue Pharma's Bankruptcy Plan

The U.S. Justice Department is condemning a proposed bankruptcy settlement for Purdue Pharma, the maker of Oxcontin. In court filings Monday, two divisions of the DOJ described the plan as fatally flawed.

The DOJ's U.S. Trustee program, which serves as a national watchdog over the federal bankruptcy system, said the deal is unconstitutional and illegal.

In a separate brief, the office of the U.S. Attorney for the Southern District of New York said the plan violated the "constitutional right to due process" for those with potential opioid claims.

Under a proposed settlement negotiated over the last year, members of the Sackler family who own the company would contribute roughly $4.3 billion from their private fortunes to help compensate people and communities harmed by Oxycontin.

In exchange, the Sacklers and a long list of their associates who haven't filed for bankruptcy would be granted so-called "third party releases," sheltering them from future opioid lawsuits.

That provision has been highly controversial, but in recent weeks a growing number of states have signed on to the plan.

In his objection, however, U.S. Trustee William Harrington described the liability releases as "impermissible."

He accused the Sacklers and their associates of using the bankruptcy system to avoid liability for "alleged wrongdoing in concocting and perpetuating for profit one of the most severe public health crises ever experienced in the United States."

The Sacklers, who by their own reckoning earned more than $10 billion from opioid sales, have said repeatedly they did nothing wrong and acted ethically.

Harrington noted that under the settlement plan, many of the parties gaining immunity from opioid lawsuits aren't expected to contribute cash to compensate Purdue Pharma's debtors.

"Victims must involuntarily 'settle' for what the [bankruptcy plan] disclosure statement estimates may be as little as $3,500 in compensation for a life upended due to opioids because the Sackler Family says so," Harrington concluded.

In her separate filing, acting U.S. Attorney Audrey Strauss argued the bankruptcy plan improperly strips those with potential opioid claims of "a sufficient opportunity to be heard," effectively denying them due process.

Both objections were filed in the court of federal bankruptcy Judge Robert Drain, who is widely expected to approve the Purdue Pharma settlement at a confirmation hearing scheduled for August 9.

During court hearings, Drain has repeatedly described the settlement as an opportunity to avoid years of costly and uncertain litigation.

In a statement emailed to NPR, a spokesperson for Purdue Pharma said the reorganization plan would "transfer billions of dollars of value into trusts for the benefit of the American people."

The company also noted that third party releases "have long been allowed under the law in most jurisdictions."

A spokesperson for a branch of the Sackler family declined comment.

The aggressive marketing of Oxycontin by Purdue Pharma that began in the late 1990s is widely seen as a trigger of the nation's deadly opioid epidemic, which has killed more than a half-million Americans.

The company has twice pleaded guilty to federal criminal charges related to its marketing practices.

However, members of the Sackler family who own the company and served on its board have never faced criminal charges and are not expected to acknowledge any wrongdoing under the current bankruptcy plan. [Copyright 2021 NPR]